The recent collapse of investment bank Bear Stearns, the lack of market liquidity and the sub prime mortgage crisis are all representative of more fundamental flaws in the financial system and American economy. Further economic decline can be expected as long as rampant monetary expansion, costly wars and moral hazard creating financial deregulation continue.

American economic and military decline can broadly be attributed to a decline in domestic oil and industrial production coupled with strains on its military capacity to enforce the global financial and economic order. As the economic fundamentals that brought the United States to its position of power post WWII erode, the economic system used to maintain its dominance becomes increasingly unstable.

The inherent instability of the Western created global financial system has most recently come to light in the form of the sub prime crisis and a resulting decrease in market liquidity.

Financial deregulation has allowed banks to underwrite and securitize speculative debt by providing mortgages to those unable to pay, bundling them, misrepresenting the associated risk, and then selling them at a profit.

Although profitable in the short term the reality that both the debts and securities are bad can only be ignored for so long.